Ever had a friend boast about getting a big tax refund and you just couldn’t figure out how they did it?
“But I’m a therapist,” you say. “It’s not like I’ve got a truck full of tools or a surgery stocked with medical equipment to claim!”
Well, as a therapist, your tax deductions might not be as large as some other professions, but there are still a lot of expenses you can claim.
Understanding what expenses you can claim as a behavioral health practitioner won’t just put more money in your pocket come tax time—it can help you level up your entire business.
By claiming tax deductions for things like advertising and marketing, home office expenses, mental health billing software, and continuing education, you can set smart financial goals to diversify your work and grow your business.
For an overview of some of the most valuable tax deductions for therapists, along with advice on how to keep track of your tax write-off, keep reading.
Treat Tax Deductions Like Session Notes
First things first, if you want to maximize your tax deductions as a therapist, you need to treat them like session notes.
What does that mean?
Like case notes, keeping track of tax deductions isn’t the most enjoyable part of being a therapist, but to get your desired outcome—it must be done.
You wouldn’t expect to be reimbursed by an insurer if you didn’t write your therapy notes. Or to do a good job of documentation if you let it all pile up for months on end. So don’t do the same with tax deductions.
The therapists who are most efficient with their session notes have a structured process that they follow and utilize software to make the process easier.
Setting Up a System
We can’t tell you exactly what system to use to keep track of your deductible expenses and tax write-offs. That’s going to depend on several factors, including:
- Your existing bookkeeping accounting systems
- The nature of your employment (e.g., solo provider, group practice, W-2 employee)
- The range and amount of deductions you intend to claim
- Expenses that require specific record-keeping or claiming procedures (like home office and vehicle expenses)
- Your level of administrative support
- Personal preference
Basically, as long as you have an adequate way of capturing, tracking, and storing receipts for business expenses that you intend to claim at the end of the financial year, you’ll be ok. Ideally, you would record expenses and store the corresponding receipt as they occur. But if you can’t manage that, aim to tally everything up at least monthly.
The goal is to have a clear idea of what expenses to include on your tax return at the end of the financial year and have the receipts safely stored for when you need them.
Remember, in the case of an audit, the IRS will ask for receipts to prove your tax deductions are legitimate.
Accounting software, electronic spreadsheets, archived email folders, and receipt-capturing apps are all common ways therapists keep track of tax deductions. But there is another big one on the list—Practice Management Software.
These days, technology is a big part of delivering mental and behavioral health care.
Things like telehealth, electronic health records, billing software, and mental health apps are essential tools for virtually all mental health clinicians. And as we’ll detail below, most of these can be claimed as tax deductions for therapists.
But one thing that’s often overlooked, is the value of having the digital tools you need to conduct your practice all in the one place.
With an advanced, all-in-one practice management software solution like TheraNest, a large portion of your expenses and deductions will be super simple to track (and claim), because they’re all housed on the same electronic platform.
List of Tax Deductions for Therapists
Ok. The moment you’ve been waiting for. Here’s a comprehensive list of the most valuable tax deductions that can be claimed by therapists.
It won’t include every single thing you can claim. And you’ll still need to do your due diligence with your accountant, and perhaps check the IRS website to clarify what applies to your situation. But any therapist who captures their expenses for these areas will be well on their way to maximizing their tax refund.
Marketing and Advertising
Whether it’s a personal website, business cards, or fees for listings in professional directories, most therapists will have some expenses for marketing and advertising.
As long as you can prove the expense is related to promoting your business, you’ll likely be able to claim it as a deduction. Be sure to keep track of all costs to do with things like:
- Digital or print advertising
- Designing and maintaining a website
- Consultation around marketing strategy
- Photography for promotional materials
- Paid sponsorships
If you’re working from home, renting a room in a group practice, or maintaining a full office yourself, most of the expenses from maintaining an office are tax deductible.
This one can get a little complicated, so be sure to get professional advice. There are different rules for a home office vs an office outside your home. And some pieces of equipment, like computers and furniture you might claim for depreciation rather than a regular deduction.
Whatever your situation, capturing all expenses is the first step, so get a system in place for tracking the smaller things, like stationery and utilities, as well as bigger costs, like rent or mortgage payments. Then, once you’re clear on your claiming method, you can submit your expenses at tax time.
Practice Management Software
With the move toward digital healthcare, practice management software has never been more important.
At a minimum, the system you use is likely to include some form of electronic health record to store notes and client information. But there are many other digital tools to help you run your practice. Some of the most common and useful, all of which are integrated into TheraNest, include:
- Mental health billing software. Clients can log into a secure, self-service portal to pay their bills by credit card online.
- Appointment scheduling and reminders. Keep track of all your client appointments, including sending reminders and allowing clients to independently book and reschedule.
- Secure messaging. Have a HIPAA-compliant messaging platform to communicate with clients so you don’t have to play phone or email tag.
- Billing and Revenue Cycle Management. Effortlessly create billing estimates, invoices, and receipts, and submit claims to insurers for reimbursement.
- Telehealth. Use an intuitive, HIPAA-certified telehealth solution that’s integrated with our client portal, to take the headaches out of delivering virtual mental health care.
Some therapists forego these useful tools, thinking they’re too expensive and they won’t be able to recoup their costs. However, when you use an all-in-one platform like TheraNest, virtually all of your practice management software expenses are a tax deduction that is incredibly simple to keep track of and claim.
Many therapists find that when they factor in their increased efficiency and expanded service offerings, their business profits and income actually increases with high-quality practice management software.
Get a free 21-day trial of TheraNest today!
Education, Membership, and License Fees
Therapists can claim most education and membership fees as a tax deduction.
This might include workshops, training, membership fees for professional associations, and online learning. Also, any expenses related to your registration and license are generally considered business expenses.
As long as it’s related to the skills you need to do your job or your license, if you’ve got the receipt, you should be able to claim it.
Meals, Vehicle, and Travel Expenses
Like office expenses, this category has a lot of variables, so be sure to clarify what applies to your situation.
In general, if you incur expenses in course of your employment, like buying a business associate lunch at a meeting, driving your car off-site to deliver therapy, or traveling interstate or overseas to attend a conference, you can submit a claim at tax time.
As a general rule, you can’t claim any expenses in these categories that are part of regular daily life. For example, the food you bring to work each day, driving between your home and the office, or going on a personal holiday with a little business tacked on wouldn’t qualify as a business expense.
Bank and Financial Management Fees
While digital payment systems certainly make invoicing and taking payments easier, bank fees when you’re operating your own business can really add up.
The largest expense you’ll likely have in terms of financial transactions is credit card processing fees, but account fees and interest are worth keeping track of as well. As long as they’re related to business and not personal transactions, all of these fees can be claimed on your tax return.
Mental health billing software like TheraNest makes keeping track of credit card processing fees a breeze. You can simply generate an electronic invoice to send to your clients, with a link to pay in our secure portal.
Clients can choose whatever payment method is most convenient for them and we’ll handle all aspects of the transaction. Then, when you need to claim credit card processing fees at tax time, you can generate an automated report including the total amount of fees, along with all the evidence you need to prove the expense.
Also, remember that any assistance you get to manage your finances, such as using an accountant or bookkeeper can be claimed as a business expense.
Personal Therapy and Supervision
Finally, don’t forget that as a therapist, you may be able to claim professional supervision and your own therapy as a tax deduction.
The rule of thumb here is to consider whether the input you receive from another therapist is related to your job.
In the case of professional supervision, that would usually always be a business expense, because it’s directly related to performing your duties as a therapist (and in many cases maintaining your license).
For personal therapy, you’ll need to make a judgment call.
If your therapy is mainly related to helping you do your job, for example, to manage stress and the unique emotional demands of being a therapist, then you may choose to claim it as a tax deduction. On the other hand, attending therapy for relationship issues is probably something you would leave as a personal expense.
Either way, be sure to ask an accountant or tax professional for advice if you’re unsure.
Tax Deductions Can Help You Grow
Many therapists think tax deductions are just about paying less tax and getting a nice refund at the end of the financial year.
It’s true, these are both good reasons to be smart about tax deductions. But the benefit of being savvy about tax deductions goes way beyond this.
As a therapist, you should always have your eye on avenues for future growth as a professional. Whether it’s through improving your skill set, offering new services, or expanding the size of your practice, the mental and behavioral health sector is full of growth opportunities.
Yet, as you’re no doubt already aware, positioning yourself to take advantage of these opportunities often costs money!
While tax deductions won’t cover the entire cost of these investments in your future professional self, they can drastically reduce your total outlay. And when you understand what can and can’t be claimed, you might find that the training course or practice management software you’ve had your eye on for so long isn’t as unaffordable as you once thought. To see how TheraNest can help you grow your practice, start your free 21-day trial today. Our intuitive, all-in-one practice management software solution has everything solo or group practices need to thrive and expand, including a sophisticated billing system, intelligent scheduling and reminders, a fully-featured electronic health record, a secure client portal, and an integrated HIPPA-certified telehealth feature.
DateMarch 7, 2023